Why Are the Private Returns to Innovation Likely to Be

question 15

Multiple Choice

Why are the private returns to innovation likely to be smaller than the social returns to innovation?

• A) Innovations are not likely to be profitable unless a large number of firms get involved in the production of the new technology.
• B) Innovators are often so tempted by greed that they keep their innovation a secret, so the rest of society does not know of the innovation and cannot take advantage of it.
• C) The ideas that a person or firm comes up with may leak to the rest of society, so the advantages of the innovation are not limited to the profits the innovator enjoys.
• D) The first firm to come up with an innovation usually cannot make a profit with the innovation until other firms learn about it and copy it.

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Definitions:

Ganglion Cells

Neurons located in the retina that process visual information and send it to the brain.

Optic Nerve

The cranial nerve that transmits visual information from the retina to the brain.

Just Noticeable Threshold

The minimum level of stimulus intensity needed for a person to detect its presence or a change in its presence, approximately 50% of the time it is present.

Physical Stimulation

Any external or internal stimulus that elicits a sensory or physiological response in the body.